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WhatsApp is an intriguing business. But not because it cost a whopping $19bn

The past few days have been filled with spluttering pundits comparing the WhatsApp acquisition by Facebook to some sort of end times. "$19 billion!" they cry. "For what?! They don't even take advertising!" Indeed, they don't.

Russell Davies

February 27, 2014

How long?

2-3 minutes

This is a company that has a blog post that starts by quoting Tyler Durden from Fight Club: "Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need."

It then says: "When we sat down to start our own thing three years ago, we wanted to make something that wasn’t just another ad clearing house. We wanted to spend our time building a service people wanted to use because it worked and saved them money and made their lives better in a small way. We knew we could charge people directly if we could do all those things. We knew we could do what most people aim to do every day: avoid ads."

They’re also interesting about the overhead advertising brings: "At every company that sells ads, a significant portion of their engineering team spends their day tuning data mining, writing better code to collect all your personal data, upgrading the servers that hold all the data and making sure it’s all being logged and collated and sliced and packaged and shipped out… The result of it all is a slightly different advertising banner in your browser or on your mobile screen." (The fact that they’ve sold themselves to a large ad clearing house is unavoidable.)

What's most puzzling to mass-media types is you've got a company with a vast reach that doesn't need ads

But what seems most puzzling to mass-media types is that you’ve got a company with a vast reach that simply doesn’t need advertising. It has hundreds of millions of users, it charges everyone $1 a year, it has 55 employees – that’s a decent business. It might not be worth $19 billion; it might only be worth it if you can, somehow, convert those users to eyeballs, but the existence of WhatsApp is not remarkable. I remember the same conversation about Craigslist. We’ll be having it again.

The other thing that’s fascinating about WhatsApp – it’s the first product to make this sort of exit that has not grown up in "our" backyard. More than any other similar service, its growth has occurred outside the West. It fitted circumstances and behaviours among a global youth audience that wasn’t well-served by traditional telcos. Indeed, in many ways, it just routed round the telcos.

The noise will all be about the $19 billion. The interesting thing is that this a new kind of mass-media business – serving huge numbers of people a small and focused service just isn’t that hard any more.

Russell Davies is a creative director at Government Digital Service@undermanager